Income Tax

CNBC.com reports regarding the highest and lowest income tax jurisdictions in the World.

The highest taxes of any country as a percentage of Gross Domestic Product (GDP) is Denmark at 48.2% who interestingly also has just 3.3% unemployment. Sweeden, Italy, Belgium and Finland round out the top 5 highest taxes.

The lowest taxes of any country include Mexico at just 17% of GDP, Chile is 2nd then the United States is the 3 lowest taxes of any country with just 24% of of GDP and Turkey then Korea round out the top 5 lowest.

Bloomberg.com reports that the IRS has extended the deadline for heirs to file. The tax agreement that the Congress passed and Obama signed brought the estate tax back for 2011 and provided that some estates could elect to pay capital gains and not have a full step up in basis for income tax purpose but would have no estate tax while others would be able to keep the step up in basis but would be subject to estate tax rates. For the election and next two years subject to the agreement the exemption amount is $5 million dollars per taxpayer with a maximum rate of 35%. Given the frequently changing estate tax rules this helps personal representatives, heirs and their CPAs to have more time to evaluate their estate tax planning decisions.

ADAM B. ELLICK of the New York Times Blog reports financial trouble Pakistan is in since taxpayers do not file their taxes.

He states as my colleague Sabrina Tavernise reports, nationwide, fewer than a million out of 170 million Pakistanis voluntarily filed income tax returns last year. The rate is among the lowest in the world.

In a bid for a solution — and some publicity — the Clifton board borrowed a creative idea that alleviated tax woes in neighboring India were only half of the taxpayers in the wealthy area paid their taxes It hired a team of transgendered tax collectors to go door to door to embarrass the rich until they pay.

Transgendered people, known as TGs in Pakistan, carry a social stigma in the country, and their presence rattles the rich. For many of the TGs hired by the Clifton board, tax collecting is their first salaried job, and two of them still work as sex workers.

“Neighbors will come out and say, ‘Oh, what’s happening?’ and the bad name the person will get, this will maybe convince them to pay taxes,” said Aziz Suharwardy, the board’s vice president. “And that’s exactly what happens.”

The TGs have collected $100,000 in about nine months, 10 times the cost of the program. Still, the TG’s collection barely puts a dent in the board’s $5 million tax revenue shortfall.

It is a strange way to go about collecting taxes but not that there is anything wrong with that. Apparently it is effective as it costs ten times the cost of the collection program.

On April 13 Wisconsin Congressman Paul Ryan proposed a budget proposing $6 trillion in budget cuts and making significant policy changes to Medicare and Medicaid.

President Obama than responded with a budget of his own which had the following key provisions:

1. Deficit Reduction – $4 trillion over a period of 12 years in order to strengthen the economy and encourage employment.

2. Debt Trigger – If the national debt is not on a declining path, there would be automatic across-the-board spending reductions starting in 2014.

3. Spending Cuts and Tax Increases – There would be a balance between the reductions in spending and increases in taxes.

4. Shared Sacrifice – There would be budget cuts, but also increased taxes for upper-income Americans.

5. Bipartisan Commission – Vice President Biden would chair a commission with two appointed members from each committee. The commission would negotiate deficit reduction measures.

6. Medicare – The expenditure would eventually be limited to the growth in the economy per person plus 0.5% per year. There would be no block grants to states.

7. Income Tax Rates – The top tax brackets would increase to 36% and 39.6% for upper income taxpayers. Tax savings on itemized deductions for charitable gifts and mortgage interest would be limited to the savings of a taxpayer in the 28% bracket.

Thirdway.com shows taxpayers what % and amounts of their tax dollars go to each item. The two largest amounts are around 20% each for social security and defense. The next four largest items in order are Medicare at 13.1%, then low income assistance at 9.3%, Medicaid 7.9% and net interest payments 6.6%.

In 2011 The Gift Tax annual exclusion remains at $13,000 per person per year for outright gifts but the exemption amount was made to be uniform with the estate tax exemption amount so there is now a $5,000,000 exemption for those who have not given prior gifts. However in prior law over the past decade the gift tax exemption was just $1,000,000. Nicholas Cage had already given over $1.8m in gifts though since 2004-2009 and the total he now owed as a result was just under $625,000. As a result they were placing a lien against him.

It is a sad situation continuing his debt of around $14 million that he had previously owed the IRS for income tax issues.

He had sued his manager who he claimed caused his financial ruin regarding those problems demanding $20m although the manager explained it was Cage's own fault and counter sued. It came out that Cage had bought $33m in real estate and 22 cars including 9 Rolls Royce. He had made $24 million in 2010 but needed to sell off many valuable assets he had in order to pay the IRS.

He has another tax situation now as he was late with paying for tax that went well beyond his exclusion amount and would have been due years ago but he forgot to pay the taxes as he was required to after having given the gifts.

This is another example of why this year is such a great year for the wealthy to pass along money to their friends and loved ones. Gift, Estate and Generation skipping taxes for this year and next year will be at a unified $5 million per taxpayer based on the agreement the President made with Congress and enacted into law.

The tax rate is currently at 35% for gift taxes above the exemption amount.

To see the TMZ.com breakdown of the amount of tax he owes for each year 2004-2009 click here

It is important that people save and invest whenever they are able to do so and that they work with financial professionals to achieve a plan for a comfortable retirement. To give a quick general snapshot though regarding ones retirement MSN.com has a retirement calculator which may be of interest.

If the US government were to shut down later this week this would cause a slower processing of tax returns and limit small business loans and government-backed mortgages during peak home buying season.

The last such shutdown began in 1995 and went on for 3 weeks.

Taxpayers would remain responsible for filing and paying their taxes on time which is April 18 this year given a local holiday in Washington. Tax audits will be not occur during a potential shutdown.

The IRS also will not process any paper returns during a shutdown. About thirty percent of tax filers still use paper returns. Tax filers who expect a refund should file their returns electronically and ask that the money be deposited directly into their bank accounts. While taxpayers will still be required to properly ask the help lines for the IRS will not be staffed.

Social Security payments will continue to be delivered, and applications for benefits will continue to be processed. But some services will be limited, Social Security Commissioner Michael Astrue said.

If the shutdown goes on for an extended time though there would be problems with any changes in address, status or changes.

Medicare would still pay medical claims for its 48 million recipients, who are mainly seniors but also several million younger people who are permanently disabled or have kidney failure. Payments to

The Federal Housing Administration, which guarantees about 30 percent of home mortgages, would stop guaranteeing loans. The issuance of government backed loans to small businesses would be suspended, according to the White House.

The Obama administration said the impact on the housing market would be more significant than during the last shutdown since the Federal Housing Administration accounts for 30 percent of the mortgage market, almost triple the amount 16 years ago during the prior shutdown.

The Senate overwhelmingly and in a rare bipartisan manner voted Tuesday to repeal a part of the health care reform law that would require businesses to file a 1099 tax form with the government for every purchase they make over $600.

The requirement was designed to fight tax fraud and raise money for the health care reform plan Democrats passed last year. But it quickly became extremely unpopular. Businesses properly complained it would be a major nuisance that would substantially increase administrative time with paperwork and be a burden especially on small businesses.

The Senate voted 87-12 for the repeal. Beyond enough to over ride a presidential veto if one were to occur and the House already approved the bill, so it will go directly to the president, who has not said definitively if he will sign the legislation.

The President and his administration as well as some Congressional Democrats, support the repeal, but disagreed with how the proposed legislation made up for the around $22 billion the Congressional Budget Offices claimed would be lost over the next 10 years to pay for health care reform.

Multiple sources from both parties said they anticipate the president to sign the repeal.

An assistant to Sen. Mike Johanns, Republican from Nebraksa, said the senator's effort to repeal the IRS reporting requirement always was aimed at easing the workload on businesses, not at taking a partisan whack at the controversial health care law.

White House Press Secretary Jay Carney, responding to passage of the legislation, said "We are pleased Congress has acted to correct a flaw that placed an unnecessary bookkeeping burden on small businesses," Carney said in a written statement. "And the administration remains eager to work with anyone with ideas about how we can make health care better or more affordable for all Americans."

Americans have tried many arguments claiming not to be responsible for complying with the tax laws or subject to them. The IRS recently published its annual Truth About Frivolous Tax Arguments report, which discusses both the most popular arguments people have made over the years to avoid paying their taxes, but also the policy statements and inevitable tax court decisions the government has used to refute them.

"Anyone who contemplates arguing on legal grounds against paying their fair share of taxes should first read the 84-page document," the IRS said in a statement. Click link to read full report.

Given the number of people who were filing frivolous returns claiming reasons not to be subject to the tax code in 2006, Congress increased the penalty for frivolous tax returns to $5,000 from $500. Filers typically present tax forms that show zero income or tax liability. Their reasons for not paying usually come up in tax court when the filers try to contest an audit or lien.

The arguments below are now considered frivolous by definition as they have repeatedly been heard and decided in the same manner.

Tax filer argument: refusal to pay income taxes on religious or moral grounds.

The Supreme Court has frequently asserted that saying your religious beliefs are in conflict with the payment of taxes provides no basis for refusing to pay, though.

Tax filer argument: Paying taxes violates the Fifth Amendment.

The Fifth Amendment to the Constitution says a person shall not be "deprived of life, liberty, or property, without due process of law." The Supreme Court however stated in Brushaber v. Union Pacific R.R., 240 U.S. 1, 24 (1916), that "it is ... well settled that [the Fifth Amendment] is not a limitation upon the taxing power conferred upon Congress by the Constitution."

Tax filer argument: Taxes are a form of servitude in violation of the 13th Amendment.

Courts have repeatedly ruled that paying taxes is not considered forced servitude, calling the argument "clearly unsubstantial and without merit," as well as "far-fetched and frivolous."

The Probate Attorney blog previously discussed the $319 million lottery win in New York. Today just relaying that they could have had $319 million if they had taken an annuity type payment over a period of decades however the winners decided to take a one time lump sum payment which was just over $202 million based on the time value of money. Video of Lottery winners

Since there were 7 winners they will each receive a little over $28.97 million then interesting to note they will end up with about $19.13 million after around another third is taken out for taxes.

Nice story of Karma as well that while someone cut in front of the winner when they grabbed a Snickers and were about to get the ticket and they did not say anything but just decided to buy whatever the next ticket was and would likely not have won had that not happened.

Also good to see that at least outwardly the guy who typically participates with them in buying lottery tickets but was not feeling lucky that day so he did not pay the $2 to join the group had a positive attitude and just said it was not his day, he was happy for them and he was going to move on.

Tax Freedom Day® is the amount of time that it takes before taxpayer have earned enough money to pay this years tax obligations at the federal, state and local levels.

Tax Freedom Day for 2011 in the US will be April 12 meaning it will take nearly 3.5 months of work to pay tax obligations for the year. In addition to less revenue and the tax cuts being extended this year there is also a 2% payroll tax cut this year.

Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined.

The latest-ever Tax Freedom Day was May 1, 2000. Over a three-year period, the tech bubble had driven employment and wages higher and capital gains sky-high. In combination with the higher tax rates that had been enacted in 1993, these factors caused tax collections to soar unpredictably. The Congressional Budget Office kept raising its revenue forecasts, but each year’s revenue was so much higher than predicted that the government ended up with a surplus.

All but seven states levy some sort of income tax on top of the federal income tax, and some localities do as well. When these are added to the federal income tax burden, income taxes are projected to amount to an average of 36 days’ worth of work for Americans in 2011.

Residents of Mississippi will bear the lowest average tax burden in 2011. Mississippi’s Tax Freedom Day for 2011 March 26. At the other end of the tax burden spectrum are states with comparatively late Tax Freedom Days. The residents of Connecticut will celebrate last, as usual, working until the 122nd day of the year, from January 1 to May 2, before earning enough to pay all their taxes.

The Florida tax freedom date is April 11 1 day prior to the national average. They rank 16th for earliest dates although they are just one of just 7 states without a personal income tax.

The Internal Revenue Service Commissioner said Thursday that budget cuts proposed by Republicans would have "potentially devastating" impact on the nation's tax system, including a drop in enforcement revenue by $4 billion for the rest of this year.

The Republican-led U.S. House of Representatives passed a bill earlier this year to cut about $600 million from the IRS budget for the rest of 2011.

I.R.S. Commissioner Douglas Shulman said the cuts would lead to drops in customer service, processing and enforcement.

A major part of the agency's recent enforcement efforts involve going after wealthy tax cheats. The IRS is now combing through about 18,000 new returns from those who took part in a tax amnesty program for undeclared assets held abroad.

Republicans at the hearing focused on the impact of the tax code's complexity on business and individual taxpayers, the stated purpose of the hearing.

"Too often we all forget the enormous price in both time and dollars that the individual taxpayer has to pay to comply with the tax filing requirement," said Charles Boustany, the Republican chairman of the subcommittee holding the hearing.

The audit rate for businesses with assets below $10 million is less than 1 percent and for companies with more than $250 million in assets, about 23 percent of businesses are audited, Shulman said.

The biggest companies generally have IRS auditors on site throughout the year.

The IRS collects most of the government's revenue, about $2.3 trillion in 2009. Shulman also said the agency's enforcement role contributes to cutting the federal deficit.

"Our budget more than pays for itself and directly contributes to deficit reduction," he said.

Probate Attorney Blogrecently reported how GE despite making tens of billions the past couple years has paid no taxes and even received money back by using tax loopholes, keeping earnings over seas and using losses from when they were bailed out by the government during the financial collapse.

This probate blog is intended to entertain as well as inform so here is a link to an amusing / interesting segment about the subject from commedian Jon Stewart. Click here.

Blake Ellis of CNN Moneyreports that the IRS is getting far more aggressive especially among the very wealthy.

Those who make more than $10 million as a grow saw their chances of a tax audit rise 73% last year and 18% of those taxpayers were audited according to the IRS released stats.

"There's always been this public perception that the rich are getting away with murder and the poor guy is left footing the bill," said Thomas Cooke, professor of accounting and business law at Georgetown University. "It's true that historically the low income earner was more likely to be subject to an examination than a high income earner, but now the higher income taxpayer is getting the greater focus."

Taxpayers making between $5 million and $10 million were also under more scrutiny last year. The IRS examined nearly 12% of the returns it received from people in this tax bracket -- a 54% jump from the previous year.

Regular millionaires were in the crosshairs as well. Audits of taxpayers with income over $1 million increased 15% last year.

The move to crack down on millionaires comes as the IRS looks to boost revenue and to improve its image among average taxpayers who think the IRS favors the wealthy, said Cooke.

Because rich taxpayers can often afford to spend more money on tax preparers and accountants, the perception has been that they can cheat the system more easily than the average Joe who is doing his taxes with a company like TurboTax or on his own.

More audits of the wealthy mean more revenue for the tax agency; funds collected from auditing jumped 18% to $57.6 billion last year.

"The IRS is looking for additional sources of revenue, and the higher the income, the greater the potential reward when the IRS finds mistakes," Cooke said.

In fact, the IRS has even launched a unit to specifically monitor high income individuals, called the Global High Wealth Industry unit, which took effect last year.

But a jump in audits doesn't necessarily mean that the IRS will hit the jackpot immediately. Many audits aren't resolved for several years, so the IRS will need to gauge how much money the new enforcement efforts bring in over the next few years. And the agency is only likely to continue ramping up audits of the wealthy if a significant amount of money is collected as a result.

While millionaires were hit the hardest, the IRS boosted enforcement across the board last year. Overall, the IRS audited 1.58 million tax returns last year, or about 1.11% of all the returns it received.

So that means the chances of getting audited are still slim, but 8% higher than in 2009 and double what they were in 2001.

In a letter to President Obama this week, 32 Republican and 32 Democratic Senators proposed a budget summit to implement "comprehensive deficit reduction measures." Senators Michael Bennet (D-CO) and Mike Johanns (R-NE) were the leaders of the bipartisan group.

The letter noted that the Presidential Fiscal Commission had provided "an important foundation to achieve meaningful progress" on deficit reduction. Six senators (three Democratic and three Republican) have been working to develop an actual bill that would implement the recommendations of the Fiscal Commission.

The group of 64 senators now recommends that the President develop a comprehensive package that will attack the budget deficit. The comprehensive bill would include "discretionary spending cuts, entitlement changes and tax reform."

In the view of the bipartisan group of senators, a joint effort "would send a powerful message to Americans that Washington can work together" on deficit reduction.

In a speech on March 21, Majority Leader Eric Cantor (R-VA) proposed both a reduction in the corporate tax rates and repatriation of corporate overseas funds at favorable rates.

Leader Cantor notes that the American corporate tax rates are "50% higher than even those in Europe." In his view, the international competition by multi-national companies has encouraged most European countries to reduce their corporate tax rates below those of the U.S. He suggests, "We must make America competitive again by lowering the corporate tax rate to at least 25%."

This would help to get companies like GE to keep more profits in the US and pay some taxes.

The proposed corporate tax rate would be accompanied by comprehensive tax reform. In addition, Leader Cantor notes that there is "almost $1.2 trillion in overseas profits" that American companies are not returning to America due to the tax rate. He proposes that these funds be allowed to return to America at a lower tax rate.

The top tax bracket for U.S. corporations stands at 35 percent, one of the highest rates in the world. General Electric however paid nothing in federal taxes last year even as it made billions in profit.

For those unaccustomed to the loopholes and shelters of the corporate tax code, GE's success at avoiding taxes is nothing short of extraordinary. The company, led by Immelt, earned $14.2 billion in profits in 2010, but it paid not a penny in taxes because the bulk of those profits, some $9 billion, were offshore. In fact, GE got a $3.2 billion tax benefit.

"Two things are disconcerting. One is, there's disproportionate amount of profits being reported offshore. And then, even for the profits that are reported onshore, they're paying less than 35 percent," said Martin Sullivan, a contributing editor for Tax Analysts.

2010 was the second year in a row that GE recorded billions in profits and paid no taxes.

The company claims that its zero-dollar tax bill is largely a result of losses at its financial arm, GE Capital, due to the Wall Street meltdown.

In 1983 Billionaire Leona Helmsley said "only the little people pay taxes". While she went to jail for tax evasion that comment and GE has acted within the tax code this comes to mind that a massive company like GE can avoid paying a cent and in fact get money back despite making billions of dollars.

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.'s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world's best tax law firm. Indeed, the company's slogan "Imagination at Work" fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

While the financial crisis led G.E. to post a loss in the United States in 2009, regulatory filings show that in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from the I.R.S. of $4.1 billion.

Allen West a first term US Congressman in Southeast Florida has suggested some radical proposals recently such as abolishing the Internal Revenue Service and Income Taxes.

He has also suggested to stop extending unemployment to discourage the bad acts of not looking for work.

Despite being from a district that has many retirement communities has has also pushed for entitlement reform.

West recently explained if Social Security, Medicare and Medicaid "are left on autopilot, if we don't institute some type of reform, they'll subsume our entire Gross Domestic Product" by 2040 or 2050.

Social Security, the largest federal program, mainly helps retirees. Medicare provides health coverage for elderly people. Medicaid helps those with low incomes. Combined, the three consume about 40 percent of the budget. Their costs are growing rapidly. Social Security and Medicare benefits now exceed the payroll taxes that fund them.

Obama's debt commission recommended gradually increasing the full retirement age, from 67 to 69, over the next 65 years.

In Washington, Democrats are conflicted. Thirty-two Senate Democrats joined 32 Republicans in urging Obama to negotiate a broad-based spending plan that includes changes to Social Security and Medicare.

The centrist Democratic group Third Way says the public is ready to embrace gradual changes to entitlement programs and that Republicans are winning the issue so far.

"We don't believe Republicans 'going too far' will be their Waterloo," the group said in a memo. "The party seen as most serious on the issue will win the day."

If Republicans and Democrats cannot agree soon on spending plans for this year and next, the government could face its first partial shutdown since 1996. That prospect worries leaders of both parties, and they are watching to see if last week's recess hardened of softened lawmakers' positions.

West suggested there is room for compromise, but not much.

"I'm not for shutting down the government," he told the Coral Springs crowd. But he said Obama must lead the budget negotiations, or else.

If there is a shutdown, West said, "it's going to be because the president is not engaged."

Rapper and actor Ja Rule admitted Tuesday that he failed to pay taxes on more than $3 million in income, and he faces up to three years in prison.

The platinum-selling rapper, whose given name is Jeffrey Atkins, earned the money between 2004 and 2006 while he lived in Saddle River, an upscale community in northern New Jersey.

If the plea conditions are met, the government will dismiss two counts against him for unpaid taxes on about $1 million he earned in 2007 and 2008.

Atkins is scheduled to be sentenced June 13 on the three tax evasion charges. He faces up to one year in prison and $100,000 in fines on each count.

According to a court filing by the U.S. Attorney's office, Atkins earned the money from music royalties paid to ASJA Inc. and live performance-related income paid to Rule Tours Inc. Atkins was the sole shareholder of both companies, the government alleged.

His attorney noted that her client surrendered voluntarily and will pay the delinquent taxes.

When most people think of investing they think of stocks and other more traditional investments Wayne Gretzky however decided to do some alternative investing. According to a video on AOL today he bought a Honus Wagner T206 card from 1909 for $451,000 from a Sotheby's auction that he called an investment. His father called him an idiot. The investment turned out like Gretzky's career to be a great one. The card thought to be the holy grail of baseball cards as there are just about 60 in existence then sold in 2007 for $2.8 Million dollars. He made a 520% gain on the investment.

The card although one in bad shape was recently in the news as well recently when a card that a nun had inherited from her brother and she sold it along with other Catholic nuns Sisters of Notre dame to pay for charitable operations.

$220,000 was received for the card after the payment to the auction house despite it being in terrible shape and with virtually any other card could not have been sold but it sort of proved that as with any investment it is a matter of supply and demand.

The nun who inherited the Honus Wagner card from her brother would have received a steped up basis in it so for income tax or capital gains purposes its value would be that of date of death and not what it cost her brother. Since she gave it to a charitable organization who sold the card and used for charitable purpose she likely would receive a charitable tax deduction for income tax purposes and also not have to any income tax if the value had gone up from his date of death value.

The tax treatment of collectibles is that short-term gains are taxed at the same rate as your regular income. Long-term capital gains have two rates: If you're in the 15 percent tax bracket you pay 15 percent; if you're in a higher bracket, you pay 28 percent.

The value of the card is judged just as any other item of property would be what a willing buyer would pay a willing seller but having knowledge of all relevent facts and neither being under compulsion to buy or to sell.

As the Gift Legacy.com weekly update on taxes pointed out both parties entered the debate this week on the appropriate top income tax rate. House Ways and Means Chair Dave Camp (R-MI) suggested that it would be important to start tax reform process by picking a top rate. His preference for a top individual and corporate tax rate is 25%.

Washington tax commentators noted that this low tax rate would require very substantial changes if the tax bill is revenue-neutral. That is, in order to reduce the top rate from 35% to 25%, there would be very substantial changes in all of the major tax deductions.

Former Congressional Budget Office Director Alice Rivlin commented on the 25% rate. She stated, "It's feasible to bring rates down, but only if you get rid of a lot of – almost all of – the loopholes and special provisions."

The Ranking Member on the House Ways and Means Committee is Sander M. Levin (D-MI). He expressed great concern about the proposal. Levin noted, "It's one thing to conceive a goal of a top tax rate of 25% for individuals and corporations – which would reduce revenues by $2 trillion over a decade." But he continued that it would be very difficult to understand "how it would work" when actually modifying the tax deductions.

House Member Jan Schakwkowsky (D-IL) was a member of the Fiscal Commission appointed by President Obama. She introduced the Fairness in Taxation Act. This bill creates high tax brackets for individuals with very large incomes. For those with incomes over $1 million per year, the tax rate would be 45%. The small number of persons with incomes over $1 billion per year would pay 49%.

Rep. Schakwkowsky quotes a number of individuals with incomes over a million dollars per year who believe that there should be higher taxes for very high income persons. Kathryn Myers is a millionaire from Pennsylvania. She stated, "I think very wealthy people like me should pay substantially higher taxes, since we have done exceedingly well in the last few decades."

Taxes Are Too Complex

In a bipartisan statement, Senate Finance Chair Max Baucus (D-MT) and House Ways and Means Committee Chair Dave Camp (R-MI) agreed that taxes are in need of simplification.

Both taxwriters serve on the Joint Committee on Taxation (JCT). At the latest meeting of the Joint Committee, Chairman Camp stated, "There is no doubt that today's tax code is too complex, too costly and takes too much time to comply with." He indicated that it is now time to take a "comprehensive approach to tax reform" that will help to increase the number of jobs in America.

Sen. Baucus agreed and stated, "Our tax code should maximize job creation and widespread economic growth. As we work together to simplify the tax code and make it more fair and competitive, we need to be armed with the data showing the impact of potential changes to the code."

Both taxwriters are responding to the proposal by President Obama to pass a revenue-neutral tax reform for corporations. Treasury Secretary Tim Geithner testified before the House Committee on Appropriations and indicated that the White House looks forward to working with members of Congress and the business committee to design "a comprehensive, revenue-neutral reform of the corporate tax system." The goal will be to lower tax rates by reducing federal deductions.

Both the Senate Finance Committee and the House Ways and Means Committee are holding a series of tax reform hearings. Sen. Baucus and Rep. Camp are seeking to prepare legislation that would reform both corporate and personal taxes. The problem in lowering tax rates is that when any deductions are limited, there is strong opposition. However, both leaders are seriously pursuing major tax reform in 2011.

Mitch Lipka's consumer advocate pointed out that there are several websites which seek to appear to be that of the Internal Revenue Service including IRS.com but they are not associated with the government site other than the one ending in .gov.

Tom Cohen of CNN wrote an article today discussing that the tax compromise agreed to President Obama and the White House Administration and the Republican leaders in Congress will come to the floor despite threats to prevent it from Democratic leaders in Congress.

Senate Dick Durbin of IL The # 2 leader in the Senate for the democrats said that "If we want to change Washington and move in the right direction we need to stand together and compromise so that he was supporting the bill.

Among its provisions an extension of the Bush era Tax Cuts which the Congressional Budget Office scored as costing $400 Billion. $225 Billion worth in a 2% reduction to the payroll tax for a year.

$57 Billion to extend the unemployment compensation provisions which have already been extended a few times for another 13 months and a $5 million dollar estate tax exemption with a 35% rate.

Congressional Democrats point out that the estate tax change from $3.5 million which congressional democrats agreed to instead of the $1 million with a 55% rate that it was scheduled to go to up to $5 million exemption amount increase its cost from just $25 B for the 2 year term when it had a 45% rate to $68 Billion for the same two year period while only impacting 6600 families during that time. Congressman Paul Ryan a Republican however responded that the estate tax is currently 0 and is increasing to 35% and it is a compromise to move it that much and start the estate tax again but they would not lower the exemption amount. Congress will likely work out this tax dispute soon as it is coming to the floor tomorrow and there are only a few days remaining of the legislative term prior to the holidays and members of Congress going back to their districts.

Yahoo today reported an Associated Press article that the IRS is considering another program for taxpayers to bring assets back to the US and come clean about owing taxes regarding international income. They were extremely successful in getting around 15,000 people back as compliant taxpayers when they offered the program. The only catches are that the taxpayer must come forward themselves prior to being caught and they must have earned the money legally. This is typically offered to taxpayers who meet those conditions although only about 100 a year it applies to because they would then need to pay a substantial amount in interest and penalties as well as the tax the taxpayers do not come forward since the property - money they have over seas is less than the total of the interest and penalties but the IRS seeks this arrangement to get them back on the tax rolls and in compliance in future years.

As CNN reports President Obama announced an agreement in principle with GOP leaders in Congress which would provide that all taxpayers not merely those below $250,000 maintain the tax cuts. That there be a 2% payroll tax reduction and that the estate tax rates drop to 35% while the exemption amount is reinstated at $5m larger than it has ever been while there is an estate tax. These would be extended for 2 years. In return the GOP would allow unemployment compensation extended for another 13 months and not need to be paid for but be merely added to the deficit as Obama and Democrats would like.

The article does mis state that the estate tax would go to a $3.5 million dollar exemption if no action were taken though. It would actually go to $1m if no action were taken for the estate tax exemption and the rates would be a lot higher. This has not also been agreed to by the Democratic legislative leaders yet though or the full GOP rank and file so it will be interesting to see what happens and there may still be a tax dispute in seeking to pass the legislation.

Obama and Biden Release Tax ReturnsIt has become customary for the President and Vice President to release tax returns on April 15th each year. President Obama and Vice President Biden have both released their 2009 returns.

President Obama had adjusted gross income of $5,505,409. Approximately $5.1 million of his income was from royalties on sales of his books. A substantial portion of the royalties were from sales overseas.

President and Mrs. Obama paid income tax of $1,792,414. They donated $329,100 to 40 charities.

The list started at $46 million with Brad Pitt and Angelina Jolie earning $55 million and placing third, Harrison Ford making $65 for the latest Indiana Jones movie finished at $69 million with his wife who earned $4 million for her tv show Brothers and Sisters and the top spot was singers Beyonce and Jay Z.

As CNN mentions Tax Freedom day 2010 is a theoretical day at which if the worker had worked 7 days a week and did not spend any money would have made enough to pay the IRS for the year. The national tax freedom day for 2010 is 99 days after the start of the year or April 9. It is one day shorter than last year and has declined each year since 2007 given the recession causing less incomes and certain tax provisions were lower or abolished for this year.

More people spend more on taxes than on their food, clothing and shelter combined. Around 30.8% of income goes to pay various taxes each year.

In a similar sense as the tax freedom day it would take most people 35 days of work to pay for food, 13 days to pay for clothing and 60 days to pay for housing. Hopefully something can be done to lower the 50 days that it takes to pay for health care and medical treatments each year. Additionally it takes 21days to pay for recreation and 29 days to pay for transportation.

The tax freedom date is calculated for each state. Florida has a tax freedom day a few days before the national average given its lack of an income tax. Just 19 states have a shorter period and just 3 states have an overall lower tax burden. Florida is one of just 7 states with no income tax. The Florida tax freedom date is April 5.

The states with the shortest are Alaska which also has no income tax and Louisiana which has low incomes. They have a tax freedom date of March 26 for this year. While Connecticut the state with the highest per capita income is the last with their date being April 27. It takes their residents 117 days to pay the taxes they owe.

Bessemer Trust Bank prepared a PDF outline regarding the main changes that Grantor Retained Annuity Trusts (Grats) are going to have under the small business and infrastructure Jobs Tax act which. Assuming it passes in the senate it will then be signed by the President and provide that the minimum term would be a ten year Grat. It will also provide that the payments may not decline during any future year. These rules are designed to significantly minimize those who are seeking to game the system through a series of short term Grats they were confident to live past or have minimal inclusion or were able to time the market more in seeking to reduce their tax exposure. The law will not be retro active but will only impact the ability to do a GRAT without the restrictions after the law becomes law if that occurs so the planning opportunity still exists but may not shortly.

As AOL News point out Frank and Jamie Mccourt earned $108 million from 2004 to 2009 and did not owe any income taxes given all the deductions they were allowed to take.

As it also points out it helps prove the F Scott Fitzgerald saying that the rich are different than you and me. I think it also helps to push for the idea of a flat tax. Does not seem to be right that people can earn that much money and skip tax liability entirely while many people making considerably less have to pay thousands.

As AOL News reports Virginia man working as a carpenter who never had a lot of money but won a lottery jackpot worth up to $200 million decided to keep his winning a secret and did not come forward for 5 months until he was able to be advised by an estate planning attorney and financial advisor.

The winner, Steve Williams, announced that he will continue at his same job as a carpenter after winning the 2nd largest lottery amount in Virginia history.

Based on the time value of money he decided to accept $125 million dollar cash payout now instead of having taken $200 million spread out over 26 years. After taxes his payout will be around $88.9.

As reported on Msn.com New York has recently published a list of the 250 top tax cheats and Bernie Madoff was # 68 on the list owing $984,280. At the top of the list was the former owner of Scores, Irving Bilzinsky, a New York strip club which is no longer in business who owes $15.3 million. California also has a similar list and singer Dione Warwick is number 3 and owes $2.2 million. New York followed California's lead after California passed a law requiring the publishing of the top 250 taxpayers who owed the most money and in excess of $100,000 to the state.

As CNN reports there are efforts to have Income Tax Reform which have some bipartisan support to cut the number of different tax rates in half to just 3 and to permanently fix the alternative minimum tax.